The evidence that the inflation high is contaminating the economy is giving investors chills after numbers from the world’s top retailers U.S showed a reduction in consumption of more expensive items that generate greater profit margins for companies.
Investors dropped nearly 25% of the company’s shares. target on Wednesday, after the company’s profit halved as the retailer had to cut prices on higher-end items, while Walmart (WMT) have declined more than 17% since Tuesday’s weak earnings call.
Target’s numbers reveal that consumers spent more on foods and household essentials instead of higher-margin non-essential items, while Walmart showed that customers switched to lower-margin staples.
In the most recent development of this movement, the Kohl’s Corp cut its 12-month profit forecast on Thursday.
“Retailers are starting to reveal the impact of the erosion of consumer purchasing power,” said Paul Christopher, head of global market strategy at Wells Fargo Investment Institutethe same day the bank projected a mild recession between the end of the year and the beginning of 2023.
“Consumer purchasing power is eroding at a faster rate than it was a month or two ago. We believe this pace will accelerate even further,” he said.
Eric Johnston, head of equity derivatives and hedges at Cantor Fitzgerald, said: “The (Walmart/Target) numbers are very worrying as they show that consumers are reducing discretionary purchases as company margins return to pre-pandemic levels.
While investors have been concerned about inflation for some time, the latest results have reinforced concerns about the impact of consumer inflation, said Ryan Detrick, chief market strategist at LPL Financial.
Chuck Carlson, executive director of Horizon Investment Services, says the retailers’ results appear to be potentially “another indication of maybe a slowdown in the economy.”
“I just wonder if people are really starting to get pressured by fuel costs — both businesses and consumers…when you’re paying more than $5 for a gallon of gas, that’s a smack and a smack for everyone” , said Carlson.
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Source: Moneytimes
I am an author at Global happenings and I mostly cover automobile news. In my time working in the automotive industry, I have developed a keen interest in the latest developments and trends. My writing skills have also allowed me to share my knowledge with others through articles and blog posts.
